In addition to their $120,000-a-year of income, Sal and Carla have substantial savings and investments.Michael Bell/The Globe and Mail
Sal and Carla have run a successful consulting business over the years, saved well and used tax-planning strategies such as their individual pension plan (IPP) to ensure their financial security. An IPP is a form of defined-benefit pension plan.
Sal is 69, Carla is 65. They have three adult children in their 30s.
In addition to their $120,000-a-year of income, the couple have substantial savings and investments. They have decided that some of their wealth will be used to fund a donor-advised fund at a local community foundation. They want to maintain their current lifestyle spending of $180,000 a year after tax when they retire in the next year or so. They are also concerned about keeping taxes and estate fees to a minimum.
Their questions: How to draw down their registered savings funds (RRSPs) to meet their $180,000 after-tax spending goal; how to maximize what they leave to their three children by reducing probate and estate taxes; and how to ensure they will have $500,000 for a family foundation, Sal writes in an e-mail.
In this Financial Facelift, we asked Brinsley Saleken, a fee-only financial planner and portfolio manager at Macdonald Shymko & Co. Ltd. in Vancouver, to look at Sal and Carla’s situation. Mr. Saleken holds the certified financial planner and advanced registered financial planner designations.
Are we prepared for the coming explosion in long-term care needs?
In this Charting Retirement article, Frederick Vettese, a former chief actuary of Morneau Shepell and the author of the PERC retirement calculator (perc-pro.ca), weighs in on the importance of making arrangements now in the event of long-term care needs here.
Singer Bram Morrison’s eyes opened up to a new world as a taxi driver
Alongside best buds Sharon and Lois, 83-year-old “Skinnamarink” singer Bram Morrison has been a staple in Canadian children’s hearts since 1978, writes Rosemary Counter, in this Investing article. In the great history of struggling musicians, however, Morrison absolutely worked a series of side gigs along the way. Here, he shares his story.
“In 1968, when I was 27, I’d been touring up North for a while with the folk singer Alan Mills, a friend and a mentor who’d hired me as his accompanist. He said he picked me because I seemed the person most interested in doing what he was doing – and he was right. Alan was such an inspiration and I wanted to be just like him someday.
But it wasn’t going to happen overnight, I knew that. I wasn’t anywhere near established or well-known enough to make any kind of regular income. Which is the usual case with almost any kind of performer. So I became a taxi driver that summer before I decided to go to a teacher’s college to become an elementary school teacher.
I liked the idea of driving a cab because I could do it or not do it whenever I wanted, and start and finish whenever I chose. Nothing was prescribed and freedom’s great, but also you get exactly what you put in. I found out very quickly that I wouldn’t make any worthwhile money if I didn’t put in a long shift – I’m talking 12 or 15 hours. I’d often start in the early morning and drive until 9 p.m. or later.”
Read the full article here.
In case you missed it
Why this estate planning professional wishes she could go back in time to advise her entrepreneur parents
In the Behind the Advice series, Globe Advisor asks advisors about their relationship with money from a young age, lessons learned over the years, and how their experiences influence the advice they give clients.
Akua Carmichael, vice-president of estate planning and services at Estate Stewards Inc. in Toronto, talks to Globe Advisor’s Brenda Bouw about her negative association with money growing up, and how watching her parents start and run a business inspired her money and career decisions:
“I didn’t have a positive association with money growing up, but I understood the importance of it. When I was 18 months old, my parents moved our family to Toronto from Ghana, West Africa. They worked in factories for the first 10 years of my life. I saw them work very hard to make money to pay the bills. I saw money as something I needed to survive, and if I didn’t have it, I wouldn’t have a good life. I also saw that you had to work hard to get money – it didn’t come easily. I grew up thinking it would be a painful experience to earn money, but if you didn’t do it, life would be horrible.
That attitude changed in my teens when my parents left their jobs to open a West Indian and African food store to serve the community in Toronto. They were the first in our community to become entrepreneurs.”
How did Akua’s upbringing influence her career path? “My parents were very successful in their business but didn’t have good financial advice. My dad had an accountant, but that was to help file our taxes. They could have done more with what they had if they had good advisors. It wasn’t something that people talked about a lot in our community. There was a major gap. I think that’s changing, thankfully.
The lessons I’ve learned about money, saving, the importance of advisors and getting good financial advice came much later in life for me. I wish I could go back in time and give my parents the services I offer now to individuals and business owners.”
Read the full article here.
For more from Globe Advisor, visit our homepage.
New rules for reporting bare trusts will spare a lot of families – why didn’t the government go this route to begin with?
There will be no repeat of the mass confusion experienced earlier this year by people trying to comply with the federal government’s new requirement to report details on bare trusts, writes personal finance columnist Rob Carrick in this Opinion column.
As ever where bare trusts are concerned, he adds, the government was operating in quiet mode earlier this week when it released changes to bare-trust reporting rules. A lack of clear information turned the introduction of bare-trust reporting into a fiasco earlier this year. Bare trusts 2.0 is a happier story.
“The government has proposed a number of changes to the bare-trust reporting rules which should significantly reduce the number of individuals who were affected by these rules,” says a summary of the changes from Pam Prior, KPMG’s national leader in the area of estates and trusts for tax and family office.
“This means fewer individuals will need to report to the CRA under these revised trust reporting rules.”
In response to the mystification caused by the initial bare-trust reporting rules, the Canada Revenue Agency earlier this year said it would not require people to file information on these trusts for the 2023 tax year.
Read the full article here.
Retirement Q & A
Q: I am younger than my spouse and so we have based her withdrawal of RRIFs on my age to minimize the tax and make them last longer. If I should pass away first, would the withdrawal rate revert to her age or would it remain the same once the rate has been established?
We asked Jamie Golombek, managing director & head, tax & estate planning, CIBC Private Wealth, Toronto, to answer this one.
A: A registered retirement income fund or RRIF is the vehicle that most registered retirement savings plan investors ultimately use to provide an income stream upon retirement. With a RRIF, you can keep the same investments you had in your RRSP, and continue to enjoy the tax deferral on the funds, with the exception that you must withdraw at least a required minimum amount annually, starting in the year after you set it up. The amount you are required to take out is based on your age – the older you are each year, the higher the minimum percentage you need to withdraw. That’s why if you have a younger spouse or partner, you may wish to elect to use their age when setting up your RRIF so that the minimum amounts required to be withdrawn annually are lower.
Once the election to base minimum payments on younger spouses age has been made, it is in place for the duration of the RRIF and cannot be changed, even in the case of divorce, separation, or the death of the younger spouse. However, if another RRIF is established and funds are transferred to the new RRIF, a new election can be made.
Have a question about money or lifestyle topics for seniors? E-mail us at sixtyfive@globeandmail.com and we will find experts and answer your questions in future newsletters. Interested in more stories about retirement? Sixty Five aims to inspire Canadians to live their best lives, confidently and securely. Sign up for our weekly Retirement newsletter.
